Why Schools Could Save Windows RT

Microsoft released the Surface RT to much fanfare last fall, but so far, customers have stayed away. Could heavy discounts for schools be the key Windows RT's path to redemption?

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Until August 31, Microsoft will offer 32-GB Surface RT tablets to K-12 schools and universities for $199. A 60% discount from the device's $499 retail price, the deal could help Redmond regain ground lost to Apple in the education market and, more importantly, carve out a niche for its underperforming Windows RT operating system.

The sale dramatically undercuts the $399 price Apple offers educators for its cheapest iPad package. The Surface RT remains more affordable even if schools add accessories, such as the ultra-thin Touch Keyboard Cover, which brings the price to $249, or the more solid and capable Type Keyboard Cover, which brings the price to $289.

To date, Surface RT has been a dud. The device's market share is virtually non-existent, and the lowly demand has compelled almost every OEM to suspend or abandon plans for Windows RT devices.

WinRT includes a preinstalled version of Microsoft Office but, unlike Windows 8, is not otherwise compatible with legacy x86 software. The ability to use Office on a lightweight tablet seemed like an obvious selling point when the Surface RT launched last fall, but the tablet confused some potential buyers with its Live Tile-dominated Modern UI and put off others with its anemic app catalogue and relatively high price.

By slashing the Surface RT's price, though, Microsoft has removed one of the factors that limited early sales -- and if there's any customer base that values lower costs, it's schools. Windows 8, despite its consumer struggles, has begun to pick up steam among educational buyers because it offers the best value proposition for many schools' needs. Win8 tablets such as the Dell Latitude and Lenovo Helix are being offered to students because the devices can serve as laptop replacements by docking into keyboards and because their form factor facilitates applications for which traditional machines are not well suited, such as documenting field research.

To be fair, Win8 tablets that convert into laptops are often less ergonomically functional than conventional clamshell designs. But schools need to accomplish many goals on tight budgets. Tablets might be limited in certain regards, but because they're generally cheaper than laptops or PCs, they nonetheless offer a compelling way for educational buyers to kill many birds with one stone.

So far, schools have been interested primarily in Windows 8, but with the new price reductions, Windows RT is positioned for a potential boost of its own. For many students, schoolwork requires access to only Microsoft Office and the Internet. Mobile apps and legacy software will factor into some students' needs, of course, and for them, WinRT might be less attractive. But from a market-wide perspective, the discounted Surface RT might be the most cost-efficient way to satisfy students' essential needs.

If Redmond succeeds in generating enthusiasm among schools, the company could repair its shrinking presence in the education market. Windows still dominates in the enterprise, but the iPad has become a favorite on school campuses. As of last fall, Apple's tablet had eaten substantially into the sales of Windows-based PCs to schools. For Microsoft, this downward trend would have been troubling enough, but the fact that Mac-based computers held steady while the iPad soared only compounded the situation.

Windows 8 wasn't widely available when last fall's statistics were collected, of course, so this year might turn out somewhat differently. That said, Apple has continued to accrue some impressive wins. Earlier this month, for example, Los Angeles Unified -- the nation's second-largest school district -- awarded Apple a $30 million contract that will provide an iPad to every student.

But now that the Surface RT is more attractively priced, Redmond could have better luck. Certainly, the company is pitching the devices to educators more aggressively than ever before: In addition to the price discounts, Microsoft is giving away 10,000 Surface RTs to attendees at this month's International Society for Technology and Education convention in San Antonio, Texas.

Still, Apple's success involves more than price. The company commands 20% of U.S. e-book sales, for example, making the iPad a natural companion for many college students. And LA Unified is paying $678 per device -- well above the base cost for school customers -- because the tablets will come preloaded with educational software.

The Windows Store now features more than 91,000 apps -- a decent number, but still far fewer than the 800,000 apps available for iOS. If Windows RT can gain momentum among educational customers, developer interest will only be galvanized. But in the meantime, schools will have to weigh -- as LA Unified did -- whether the appeal of Microsoft Office can compensate for WinRT's lesser app catalogue.

It also remains to be seen if lower prices are here to stay. The educational discounts extend a recent Windows RT fire sale in which Surface RTs were offered for $99 to attendees at Microsoft's TechEd Conference. These sudden, aggressive price drops could simply indicate an inventory dump, perhaps in advance of a newer -- and costlier -- Surface RT model. Such a device has featured into Windows 8.1 rumors for month, and with the OS update now only a few weeks away, Microsoft might be making space for new offerings.

Despite the unanswered questions, the discounts nonetheless represent one of WinRT's clearest opportunities to date. If Microsoft succeeds in winning educational customers, the OS's laughingstock status -- and its mediocre attention from developers and OEMs -- could soon be things of the past.

You make a serious mistake when you assume that price is the most important issue, if it's even a major issue at all. In the LA U case, other tablets running other OS's, including RT and Win 8 were tried. The results of the trial were overwhelmingly in favor of the iPad, with both teachers and students preferring it by a wide margin.

That is much more important than the artificial low price that Microsoft is offering now. In fact, that price is below Microsoft's costs. In other words, it's just a come-on, the pricing can't be sustained.

I think it depends on what the school prioritizes. Sure, not ALL schools are going to act on price alone. LA Unified is a case in point; the iPad - and its superior app experience - won out, despite Microsoft appealing directly to the district's decision makers. But in other cases - such as Clear Creek Independent School District in Texas, which we wrote about a few weeks back, and which was also mentioned in the "tablets at work" story we ran yesterday - schools have opted for Windows 8 devices because they offer the cheapest combination of tablet mobility, Internet access, and laptop-style word processing. So while I agree that iPads might be better educational devices for certain applications, some schools have already shown that Windows tablets offer a value proposition that fits what they're trying to achieve. The customers who will decide on price might not constitute the entire market, in other words, but they're still there, and they're still numerous.

As for the sustainability of the Windows RT pricing, I agree: prices this low are not sustainable. As I suggested in the article, Microsoft is probably dumping inventory while hopefully enticing a few people - and developers - to give RT a new look. But if some schools invest in RT during this fire sale, they might stick with RT when it comes time to refresh devices, especially since by then, Microsoft will have either gotten its app ecosystem in order or sent RT the way of Zune.

But Redmond can still take a lesson about pricing away from this sale. At its original price, virtually no one wanted the Surface RT. Now that it's a lot cheaper, interest has increased. When the next Surface RT comes around, Microsoft needs to find a middle ground-- cheap enough to sustain interest, but not so cheap that it's shooting itself in the foot. Some analysts - Dave Johnson at Forrester is one - believe that the Modern UI app economy is the real value proposition here, not the devices, and I agree. So I think it could make sense for Microsoft to accept very low margins in order to stimulate growth elsewhere in its ecosystem. Maybe a new Surface RT that maintains the original's build quality but runs $299 or so.

But we'll see. My point in the article wasn't to suggest that Windows RT will definitely succeed in schools; rather, I was pointing out that this is the OS's first clear growth opportunity in a while.

Microsoft would do well to discontinue this device. They made this device, which wasn't bad, they advertised A LOT, and sales were horrible. What are they going to improve to get people to buy this tablet? Reducing the price is a short term remedy, but what does that accomplish? Microsoft needs a reason for this tablet to be special, it needs to offer a unique feature that will entice people to buy it. Even if Microsoft does make device improvements, I doubt they can make the windows RT tablet a viable competitor in the market. It has already been throughly rejected. Let it go to focus on other battles.

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